Even in this modern age, people face financial literacy issues, poor banking, less access to bank accounts, and high transaction charges in some areas. The banking system needs to be updated and accessible to everyone. Financial experts and governments are trying to tackle the issues related to social and economic services. Financial experts are trying to implement Financial Inclusion strategies in the economical world.
Financial Inclusion is a digital strategy that uses a fintech (Financial Technology) software system. It plays a fundamental role in the progress of any state and country. Synchronization of fintech software systems with economical services minimizes the economic world’s challenges. It reduces financial literacy, minimizes transaction costs, and provides a robotic manual process. The Fintech software system in the financial world makes banking services easily accessible even in developing countries. Financial Inclusion has become the topmost priority for financial experts and states.
According to the World Bank, more than 75 countries use financial inclusion projects. These countries provide easy and reliable banking facilities to 20 million households and 92 million individuals.
If you are interested to know more about financial Inclusion, its importance, and its role in the national programs, then you are at the perfect place! This article will help you to learn everything about financial Inclusion.
Introduction of Financial Inclusion
Financial Inclusion is also termed inclusive finance. Financial Inclusion means that every business and individual must have equal and reliable access to economic services like lending, banking, and wealth management. Inclusive finance strategies mainly focus on unbanked and underbanked individuals.
Unbanked
The term unbanked refers to people who do not have any bank account due to a lack of financial literacy and issued IDs.
Underbanked
Underbanked people owe bank accounts, but they do not have sufficient access to basic financial services provided by economic institutions. They use serotype financial services. They lack awareness about useful financial services like loan policies, credit card payments, and digital ways of exchanging money.
Inclusive Finance as a Key Enabler of Sustainable Development Goals
According to the World Economic Forum, 1.7 million people face poor banking issues. 31% of the world’s population does not have accessible banking services. 25% people from Asia, 10% people from Africa and 10% people of Latin America are lying in an unbanked category. The World Bank states that 55% of the unbanked groups are makeup by the whole world’s women. According to a survey, nearly 1 billion women do not have digital banking services.
Financial Inclusion plays a role of a central key in UN SDGs. Improvement in finance inclusive leads to gender equality, fully-protected funding, Safekeeping deposits, credit card facilities, and loans facilities. Financial Inclusion helps to reduce poverty and hunger. It contributes to decent economic growth and gender equality. UN Sustainable Development Goals also contribute to good economic growth, no hunger, zero poverty, sustainable, economical resources, and gender equality. So, it is not wrong to say that financial Inclusion is considered a key enabler for UN SDGs.
Top 5 Groups of Inclusive Finance Startups
Here we will discuss the top 5 categories of financial Inclusion that are trying to build a stronger economy.
1. Startups Offering Personalization and Risk Minimization
Personalized and less risky resources of banking boost the consumer’s engagement. Financial Inclusion strategies analyze the credit histories, social networking, interests, and purchasing habits of the consumers. These techniques help to apply risk-calculations techniques in finance. Integrating business intelligence with financial inclusion techniques provides personalized recommendations for the economical world and minimizes risk factors while ensuring the high engagement of the consumers.
Startups like Lenddo and ZestFinance offer personalized, economical services like credit scoring services. These services provide information about the users’ search history and social networking activities. Another startup, Koyo, located in the UK, provides personalized banking services to underbanked people. Koyo is a fintech company that emphasizes machine learning to provide digitized economical knowledge to underbanked people.
2. Startups pursuing financial well-being and education
There are many financial products such as financial startups focus on delivering financial well-being and education. You can compare financial products. These financial inclusion startups offer digital training to use their products by delivering mobile and web applications. These startups encourage the users to go with their loan, well management and save money services. By providing enough information and training about the usage of their products, these financial inclusion startups increase the transparency of their services. That leads toward high customer engagement.
Banking institutions can provide a sustainable solution to all financial challenges by using financial inclusion techniques. Financial Inclusion offers the facility to round up all the customers’ transactions and make a change to the customer’s accumulation account.
Bank of America is a real-life example of a startup that offers education and financial well-being. Bank of America has developed an app for middle-aged women that rounds up all the transactions and sends a change to their accumulation accounts. This app helps middle-aged women to pay their bills and make an exchange of money easily.
3. Startups Providing Access to Financial Services
Synchronizing banking services with financial inclusions strategies and artificial intelligence (AI) provides easy access to financial services. Traditional banking services impose restrictions on access to financial services. Like if a customer wants a loan of $500. Stereotype banking services will impose some restrictions on it, making financial services inaccessible for some people. While on the other hand, financial inclusion startups try to remove such restrictions and make the services available to everyone equally.
An example of such a start providing access to financial services is Acorns. “Acorns” is a US-based financial inclusion startup. It facilitates the users with micro and Robo investing. Due to the personalized banking financial services, Acorns has 8.2 million customers.
4. Startups Focusing on Solving Specific Customer Issues
Some financial inclusion startups are trying to solve specific customer issues. Like, they are providing online banking services to developing countries. Such startups allow customers to make online payment exchange through smartphones and via normal cell phones. These startups are specially made for underbanked people. An underbanked group of people gets information about digital financial services via these startups.
Kenya is the best example of this financial inclusion startup. Kenya is one of those countries that adopted mobile banking early. M-Pesa system made it possible for Kenya to facilitate its people with mobile banking. Safaricom introduced M-Pesa system, and Vodafone allows the users to make an online exchange of money.
5. Startups Providing Traditional Banking Services at Less Cost
The important part of financial Inclusion is to offer smooth traditional banking services at a lower price. These startups make banking services affordable for everyone. With Artificial Intelligence and financial inclusion strategies, finance experts try to manage time-consuming tasks and operating expenses. This thing leads to less consumption of money and increases the employees’ productivity. In this way, commission charges are reduced, and banking services become available at a lower cost, especially in newly emerging countries.
A good example of such a startup is Revolut. Revolut facilitates customers with mobile banking. It has a Smartphone app that facilitates customers with digital banking services like online payment and currency exchange at very affordable prices.
Conclusion
Financial Inclusion plays a vital role in the world of the economy. It helps to make banking services available for everyone at affordable prices. A survey says that 90% of businesses are involved in inclusive finance globally. By integrating financial services with fintech software solutions like financial Inclusion, finance experts can enhance the affordability, productivity, and availability of financial services.
